Perhaps, to use a David Cameron-ism, Peter Mandelson is yet another analogue politician in a digital age. When Tuesday's headlines served notice of the business secretary's plan to crack down on illegal filesharers by severing their broadband connections, at least one Labour insider was heard claiming that "Peter just doesn't get the internet" – while high-ups in the online industry wrung their hands at the alleged impossibility of the proposals.

If so many computers and wireless connections are shared, both legally and illegally, how will individual miscreants be successfully traced, let alone punished? Given the popularity of illicitly distributing music, films, games and software, are internet service providers really going to monitor and then shop so many of their own customers? Such are the drawbacks of an idea that – even if it was not mentioned at a meeting between Mandelson and the music tycoon-turned Hollywood player David Geffen in early August – looks likely to have been firmly put on the agenda by Lucian Grainge, the chairman of the behemothic Universal Music, and an analogue man if ever there was one.

But let's not get too carried away. In the backstory to all this lurk arguments that will not go away: artists, writers and inventors should be paid; the traditional creative industries have their uses; and the great chaotic utopia envisaged by some online evangelists would be culturally impoverished – a world that would create millions of buskers, but no Beatles.

Unfortunately, too many people in the entertainment industry have the same limited skill set as the government, taking panicked refuge in the ways of the clunking fist. In PR terms, the results can be disastrous: witness the recent trial of a Boston PhD student named Joel Tenenbaum, ordered to pay $675,000 to four record labels for sharing 30 songs – which worked out at $22,500 per tune. The fact that he had actually done the same with as many as 800 tracks quickly faded into the background: given a punishment as stupid as this one, he was instantly turned into a righteous poster-boy.

Cases like that inevitably boost the profile of some equally knuckle-headed people on the other side of the argument. If you haven't yet heard of The Pirate party, you soon will: founded in Sweden three years ago, it now boasts nearly 45,000 members and a seat in the European parliament, and has just launched in the UK. Among its policies are the legalisation – and encouragement – of filesharing, the abandonment of patents, and a five-year limitation on commercial copyright.

This kind of libertarianism gives off the same whiff as the pro-freedom politics once espoused by acid house party organisers – not just politically empty, but off-puttingly spivvy. The key catalyst in the party's rise, after all, was the case of four Swedes responsible for the giant filesharing site, The Pirate Bay. In April this year they each went to prison for 12 months; two months later they managed to sell their business for a cool £5m (the deal is set to close tomorrow).

Piratical ideas, however, are catching on. In certain liberal-left circles you will hear wide-eyed stuff about "participatory production", and a whole new creative counterculture that could topple monopoly capitalism. More money-minded people wave around the Wired magazine editor Chris Anderson's book Free, and claim "information wants to be free". In crude terms, Anderson's thesis is that even if stuff itself is increasingly available for nothing, the frenzied consumption of it brings plenty of business opportunities. So it is that you end up with a new version of the syndrome that has defined the cutting-edge of western business for 40 years: hippies and yuppies pushing the same arguments, and the latter hoping to cash in on them.

Thus far, their shared evangelism has not been dimmed by some inconvenient possibilities. To take a few random examples, YouTube could be a business dud, it's unclear how or when the music-streaming service Spotify will turn a profit, and Rupert Murdoch's new drive to charge for online news content may well spread. The world may turn out to be more complicated than the pirates, spivs and evangelists think – and for orthodox companies and corporations, compromise and creative thinking could yet rescue the future.

But therein lies the big problem: as things stand, big business too often takes the quintessential reactionary stance, reacting to a world determinedly moving one way by trying to pull laws and rules even further in the opposite direction. Perhaps because these debates have yet to decisively break into our politics (it still amazes me that the print and broadcast media still present coverage of all this as "geek" stuff), the argument remains far too shrill and polarised. In short, we are in danger of getting absolutely nowhere.

For an antidote to all the shouting, see The Public Domain by the Scottish law professor James Boyle, these days at Duke University Law School in North Carolina. Unlike Anderson's, his book is not just free (see thepublicdomain.org), but a level-headed and convincing glimpse of the world to come, based on the idea of the Creative Commons License, whereby the people who make and invent things choose which of their rights are protected or waived.

Boyle thinks the ownership of ideas and facts is untenable. He enthuses about open-source software. But he also writes the kind of sentences that would make some digital zealots spit blood. "Copyrights over literary works should be shorter, and one should have to renew them after 28 years – something that about 85% of authors and publishers will not do, if prior history is anything to go by." His approach is all about trade-offs: the state realising what it cannot control, and business surrendering what has probably gone forever – but societies also understanding that going too far in the opposite direction benefits no one.

There's also a case to be made for societal norms, and the responsibility of all of us to observe them. If you can occasionally afford to buy films, books or software, you should do so. If you have kids, teach them that the creation of great things tends to take time, effort – and often, hard cash. To do so isn't to line up with Mandelson, Grainge and the analogue crowd: it's to understand that at the core of any sustainable culture, there's a crucial knot of ethics and pragmatism that the year-zero libertarians are set on undoing. At the risk of sounding like someone's dad, they're not called pirates for nothing.